Developing Asia to see 4.2% growth in 2002: U.N.

Developing Asia to see 4.2% growth in 2002: U.N.

Reuters Bangkok

Asia's developing economies are likely to grow 4.2 percent this year against a background of a "gentle" global recovery, but Japan will see a second consecutive year of contraction, the United Nations said on Friday.

The developing economies in the Asia-Pacific region would improve on last year's 3.1 percent growth in gross domestic product (GDP), the Economic and Social Commission for Asia and the Pacific (ESCAP) said in its annual economic survey.

Of the three countries classed by ESCAP as developed economies, Australia and New Zealand would see low growth and the Japanese economy would shrink, ESCAP said.

"While the majority of the ESCAP economies are expected to exceed their 2001 GDP growth rates...improvement is likely to be modest, about 1.1 percentage points higher in 2002 than in 2001, for the ESCAP developing economies," the report said.

"Any upturn in the ESCAP developed countries in 2002 would be moderate. It is forecast that Japan will experience another contraction in output in 2002."

ESCAP's forecasts are slightly lower than those of the Asian Development Bank (ADB), which earlier this month forecast Asia's developing economies to grow an average 4.8 percent this year.

The U.N. agency said the prospects for a global upturn were still unclear, with Japan struggling with its third recession in a decade, the European Union unlikely to improve on last year's growth and the economic environment in the United States still uncertain.

ESCAP's report was most upbeat about China and South Korea, which last year chalked up GDP growth of 7.3 and three percent respectively.

"The outlook remains positive for China in 2002...GDP growth is expected to remain strong, driven by rising domestic consumption and investment," it said.

"Growth in the Republic of Korea in 2002 should exceed the 2001 rate as domestic stimulus begins to have a positive effect on output."

The report said the fate of Southeast Asia's export-dependent economies was more uncertain, and would depend on the strength of any global upturn. Slow progress in corporate restructuring was also hindering growth, it said.

Economies in South and Southwest Asia were dependent on a recovery of agricultural output after a severe drought, ESCAP said. It also warned that high domestic debt would act as a major drag on medium-term economic growth.

Given uncertainty in the global economy, Asian governments should spur domestic demand by easing monetary policy further and pumping up spending, ESCAP said.

"At the national level, most governments would need to put in place measures to preserve or enhance the momentum of growth through counter-cyclical fiscal and monetary policies," the report said.

"The latter would take precedence where public debt was already at a high level," it said, warning countries against sacrificing "sound medium-term macroeconomic fundamentals".